Launching a new ecommerce venture is always AMAZING, fun, and scary. There’s also always so much to do and consider. If you’re doing it solo, chances are you’re immersed in researching website design, conversion optimisation, and social media marketing. You might even have a bit of time for SEO!
However, before you even put pen to paper to write your business plan (you were going to write one first weren’t you!?), there are a few things you need to be aware first when starting an online fashion store.
1. It’s a crowded and competitive market
These days anyone can start an online store – platforms like Shopify and BigCommerce make it really easy. Many big retail chains have also recently entered the marketplace which, combined with all the smaller, trail-blazing retailers, means there are many fish in the online fashion sea.
So the very first thing you need to do is a lot of research. You need to know who the competitors for your target market are, what they offer, and how you will differentiate yourself. Then you’ll need to figure out how to communicate your differences to your target market!
2. Sourcing your products needs consideration
If you’re buying cheap clothes, make sure you know where they’re made and what they’re made from. The fashion industry does not have a good reputation for sustainable or socially-responsible manufacture, and as a buyer it is your responsibility to investigate how ethical your supply chain is.
Have you budgeted in flights to inspect factories, or at the very least established that your suppliers are certified? Do you trust your suppliers? Your products will ultimately make or break your store because they are the representation of your brand that your customers will be left with after purchasing.
If you have dodgy products, your customers are unlikely to return.
3. Manufacturing lead times can be a real drag
When you’re buying made-to-order, seasonal fashion items and importing them, you may find that they’re subject to a VERY long lead time. Many northern hemisphere manufacturers produce to seasons that are out of sync with Australia. What this means is where you would normally be able to order four to five months in advance of the season (e.g. order in March for delivery at the start of the season in August), you might need to add six months to the process.
Then when the stock is ready, will your manufacturer store it until you need it? When do you need to pay for it? Significant cash flow planning is required for this set up. On the other hand, if you are buying Australian designed and made fashion you’ll be able to avoid most of these issues!
4. The additional risks of importing
Importing from overseas can carry significant risks such as foreign exchange risks, import customs duties and taxes, plus the boring but necessary insurances. If you are buying from an inherently risky country such as China, your stock insurance and business liability premiums may be high. Some insurers won’t even insure stock manufactured in China due to the high levels of litigation they’ve experienced from customers suing for rashes or irritations caused by heavy chemicals or dyes. If you’re importing from overseas then, as far as insurers are concerned, you are treated as the manufacturer and the buck stops at your door.
5. Growth is limited by the amount you can invest in your products
As with any other product based business, your growth is often restricted by your inventory costs. Most retail businesses need to purchase their stock, then list it online, then sell it and try to recoup the expense of the stock. To grow significantly you need more inventory, and therefore more capital.
6. Online fashion isn’t as sexy as bricks and mortar
Yes your product imagery, website design and copy need to be killer. But getting sales comes down to traffic, conversion and good systems. It’s about ruthlessly maintaining your website, uploading hundreds of stock photos, keeping on top of inventory numbers, writing (and then tweaking) hundreds of product descriptions (and meta descriptions), and then writing more blogs and social media posts.
At the end of the day, it’s also about providing great customer service. Except you don’t get the fun of actually talking to most of your customers the way you do in a bricks and mortar store.
7. It’s also a margins business
In my niche, generally a distributer pays for stock at around 25% of the RRP (with minimum order quantities around 1,000 per style or more). They then wholesale the stock at 50% of RRP to the retailer or stockist (and there may or may not be minimum order quantity requirements for wholesale prices). Then the stockist does their very best to sell at RRP to the end consumer.
In some cases, the markup from the wholesale price can vary between two times or two and a half times wholesale costs, which sounds great. But the retail price is the start of season price. By the end of the season (when you’re left with odd sizes and some styles that just didn’t sell) you may need to mark them down to below your wholesale price. All up, this means if you manage to have an overall average mark up of 1.8 times, you’re doing well.
But remember, when you’re operating in the online space, consumers are often comparing your prices with your competitors. This makes it difficult to maintain a decent price, particularly when everyone always seems to be having a sale!
After working out your sales, you then have to take out your marketing costs and operations costs and then you’re left with your profit or loss. The smaller you are, the more difficult it is to obtain favourable wholesale prices, and to cover your marketing and operations costs.
So as you can see, like any business, online fashion has many pros and cons and isn’t for everyone. If fashion is your niche and passion, and you’ve done your homework (see above), then go for it. Your passion and authenticity will come through in everything you do and will attract the people you want to do business with.
If you’re just trying to make a fast buck however, I’d suggest trying something else. This is a business for the long haul, with lots of lessons to be learned along the way!
Have you considered starting an online fashion store? What factors went into your decision to pursue the idea … or dump it?